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UK Chancellor Hammond to consult on marketplace VAT collections

By Dan Wilson March 13, 2018 - 3:42 pm

Today the UK Chancellor of the Exchequer, the country’s finance minister, made his Spring Statement to the House of Commons in Westminster. This follows a move to have a full budget only once a year, in the spring. One of the aspects of the wide-ranging, upbeat speech related to online marketplace VAT collections.

This follows great concern over recent years from online merchants about sellers from overseas, often from China getting a pricing advantage because they weren’t paying UK VAT: a story we’ve covered many times on Tamebay.

You can read the full statement here on the British government’s website.

He said this with specific regards to online marketplace VAT collections, and ensuring that the VAT paid by shoppers finds itself to the Treasury:

We also publish a call for evidence on how online platforms can help their users to pay the right amount of tax. We will consult on a new VAT collection mechanism for online sales. To ensure that the VAT consumers pay actually reaches the Treasury. And we will call for evidence, too, on how to encourage cashless and digital payments, while ensuring cash remains available to those who need it.
– Philip Hammond, Chancellor of the Exchequer

It might sound like we’ve been here before and you’d be right. The government held a consultation that ended on 31st January this year that looked specifically at ensuring digital multi-nationals pay their fair share of all taxes. And included in that consultation was the question of VAT fraud on marketplaces such as eBay and Amazon.

But it looks like this new consultation will be more specific and is of direct interest to marketplace merchants. And under the the microscope will likely be the question of so-called “split-payments”. That’s where payments are made to sellers via the likes of PayPal or Amazon and the payment will be split. That which belongs to the seller will go to them but then the marketplace or payment service will administer the VAT included in the payment and ensure that is remitted fully to HMRC.

Marketplace VAT collections is a complicated area and potentially problematic. In particular, are the marketplaces competent to administer such payments. Are you in favour?

  • 3 months ago

    In Favour but there are many problems that need to be sorted out.

    Firstly, can they be trusted to do it right?

    For the honest business people that pay VAT or are not required to, would they be able to get an exemption?

    How much VAT will be collected, the full amount? What if you are on a Flat Rate Scheme, where you pay a lower rate of VAT.

    How would larger businesses cope with cash-flow? Would they be able to claim back the amount owed to them for expenses & stock etc, by HMRC each month?

  • SAM
    3 months ago

    This is a Minefield, different VAT in different countries. Different schemes. We have a very high 85K in the UK what about all those under this???? they are already getting shafted with fees. The tax is actually out of date and not fit for purpose.

    Lets be honest it might not be such an issue if marketplaces had actually paid any tax they were due for the last few years.

    We pay any VAT due and are capable ourselves so we are not in favour of tax dodgers collecting any TAX from us.

  • Andy R
    3 months ago

    Absolutely not. How are VAT scheme sellers going to be handled. They got shafted when Ebay added Vat to their billing for all sellers, with scheme users being unable to reclaim it.

    Zero confidence in this eeyore of a chancellor or in this wacky idea.

    • 3 months ago

      @Andy R

      How did they get “shafted”? They can just switch to standard VAT accounting if they want.

      What about all the people that are not registered for VAT, did they not get shafted as well?

    • ifellow
      3 months ago

      The government should allow billions in fraud to protect your flat rate scheme ?

  • Derek duval
    3 months ago

    a step in the right direction…this will help me out no ends. ive got several compitetors who avoid vat yet some sell 500k a year…

  • rodney
    3 months ago

    yes ebay and Amazon should be required to collect the VAT and pay HMRc direct its not hard and will create level paying field as too many sellers not paying VAT

  • 3 months ago

    Suspect this is unworkable for reasons of responsibility: who will determine the vat rate on the sale — the marketplace doesn’t inspect the item — leave it to the seller to self-declared?; how will the cashflow gap be closed: funding small business is one of the problems holding back growth in the UK,and this is a way of increasing that problem; and complexity: what about flat rate and margin scheme sellers?

    The technical rollout would be a nightmare but possible, and would all marketplaces be affected or just one or two big ones?

  • Boss-Hog
    3 months ago

    In favour for sure, technically its need some thinking about, but I can’t see it being that difficult.
    Easy to administer, just charge the flat rate “Retailing not listed elsewhere” 7.5% across the board except for zero rated items as a starting point to get it going quickly. Non-EU with goods based in the UK pay 17.5%.
    Legit VAT reg companies can claim it as a credit on their next VAT return, non-VAT can claim it back via some method, with ebay/amazon submitting monthly/quarterly sales data to HMRC.
    There is a cash flow hit, but this will soon work its way through.
    VAT fraud on eBay and Amazon, costs British businesses and our country in tax receipts billions, impact is far greater than VAT, lost corp tax, jobs, income tax, NI, and the money is sucked out of the country.